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- 17 September, 2010 -
- Investment Advisor, Legal Resources -
- Tags : california adv part 2, form adv part 2, investment adviser, investment adviser registration, new form adv part 2
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At the end of July, the SEC adopted amendments to Form ADV Part 2 and the related rules. The amended Form ADV Part 2 will be used by SEC-registered advisers to meet their disclosure obligations and generally describe the adviser’s services, fees, and strategies.
On September 1, 2010, the California Department of Corporations followed suit and announced its adoption of the new Part 2 as well, effective October 12, 2010 (see California ADV Part 2 Announcement). This effective date corresponds with the effective date of the SEC’s rule changes. The Department’s decision will help bring consistency between state and SEC investment adviser registration requirements.
New ADV Part 2
The amended Form ADV Part 2 consists of three parts:
- the “Firm Brochure” (Part 2A),
- a Wrap Fee Program Brochure (Part 2A, Appendix 1), and
- the “Brochure Supplement (Part 2B).
Every investment adviser must complete the Firm Brochure and the Brochure Supplement. The Firm Brochure, which is filed electronically with the SEC on the IARD system, will include information about the adviser and its business. The Brochure Supplement, which is a brief disclosure document about certain personnel of the adviser, will be provided to clients but not filed with the SEC.
In addition, the new Part 2 will no longer be in the check-the-box format. Instead, it will take the form of a narrative brochure written in plain English–the purpose of which is to provide clients with a more clear disclosure of the adviser’s business practices, conflicts of interest, and background.
Compliance Dates
Effective October 12, 2010, for California registered investment advisers, the relevant compliance dates for the new ADV Part 2 are:
- As of January 1, 2011 all new investment adviser applicants will have to file, through the IARD, the new Part 2 of Form ADV as part of their application.
- As of January 1, 2011 all licensed investment advisers will need to incorporate the new Part 2 of Form ADV with their next filing of an amendment to Form ADV, or their annual updating amendment to Form ADV.
- Between October 12, 2010 and January 1, 2011 applicants and current licensed investment advisers filing amendments to their Part II of Form ADV may use either the current Part II or the new Part 2.
With this change, investment advisers should review and become familiar with the new Part 2. Advisers that are currently registered with the California Securities Regulation Division will have to incorporate the new Part 2 when they file amendments to Form ADV and also when they file the required annual update. For most advisers with a December 31, 2010 year-end, the deadline for the annual update will be March 31, 2011.
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Bart Mallon, Esq. runs the Hedge Fund Law Blog and provides investment adviser registration and compliance services through Cole-Frieman & Mallon LLP. He can be reached directly at 415-868-5345.
